Debt Settlement Advice and Tips

This article isn’t for the purpose of giving you advice about how to settle your debt, rather it’s about the things you should consider prior to doing so.

There are a fair amount of nuances to weighing debt settlement as an option. This article’s purpose is to help you think about some of the more important considerations to make. Considerations that may not come to mind, since you have probably never needed debt settlement services previously.

Debt settlement fees – Most charge 20% of what you owe

The best debt settlement advice I can give you about debt settlement fees is to make sure you’re not paying more than what’s necessary. The typical fee is 20% of what you owe. I charge 10-15% of what I save you. Let’s look at the difference…

I will use a consumer with $30,000 in enrolled debt for the example

My Debt Settlement Fee

15% of what you save

Typical Debt Settlement Fee

20% of what you owe

Settle debts at 60%

$1,800

$6,000

Settle debts at 50%

$2,250

$6,000

Settle debts at 40%

$2,700

$6,000

Settle debts at 30%

$3,150

$6,000

As you can see, the difference is substantial. Even if I averaged 30% settlements on your accounts, you’ll pay 47% less than a typical debt settlement fee.

If you’re married or have a partner

If you have a spouse or a partner, the best debt settlement advice is to make sure it is necessary for both of you to enroll. There are a few things to consider.

How much of the debt is in both of your names?

Are either of you just an authorized user on these accounts?

How much debt is in your name?

How much is in your partner’s name?

Is it lopsided enough to where it would make sense for just one of you to settle your debts, so the other could keep up their credit and such?

If you and your partner have $40,000 in credit card debt but $30,000 of it is just in your name, it would probably make sense for your partner to maintain their payments instead of ruining their credit by settling their debts.

This way, one of you will be able to keep up your good credit. So if a need for credit arises, prior to rehabilitating from debt settlement, you’ll have a better chance obtaining it.

If you would like me to review your situations separately, please feel free to contact me for a free consultation.

Length of debt settlement program

The longer your debt settlement program is projected to take, the less likely you will successfully complete it. The reason: while you’re in a debt settlement program you’re not making any payments to your creditors. Meanwhile your creditors are pursuing you for collection. So when you agree to enroll into a long-term debt settlement program, you’re agreeing to play financial chicken with your creditors for the duration of your debt settlement plan.

This is dangerous for you when you consider the increased probability of being sued once you go beyond 12–18 months of delinquency.

This is one of the main reasons why the only way to reliably settle someone’s debt is to review their ability to resolve their debts via their assets rather than their future income.

When you settle your debts over time, by funding your debt settlement program with your income, it’s pretty much game over if you’re garnished. Simply because, the garnishment would more than likely eliminate your ability to continue to fund your debt settlement program.

This is why I limit my debt settlement services to people who have resources that will enable them to settle right away. It’s the only way to offer debt settlement in a successfully reliable way.

If you lack access to a resource that would allow you to settle your debts right away: I recommend settling them yourself, due to the premature representation aspects of debt settlement.

But, please understand: the key to being successful with debt settlement is the amount of time your remaining debts go unpaid. I don’t recommend settling your debts if you think it will take more than 24 months (ideally less than 12 months) to settle all of your accounts.

Compare debt settlement vs bankruptcy

Debt settlement is a viable alternative if you can settle your debts quickly. If you can’t settle your debts quickly, Chapter 7 bankruptcy may be more appealing than you realize. Review my chart to compare your debt settlement and bankruptcy options.

Debt Settlement and Taxes

Expect your creditors to send a 1099c for the amount of the difference between your balance and what they agreed to settle for. Fortunately, there is an insolvency form that you or your accountant can provide to the IRS when filing your return. This insolvency form acts as a worksheet for your overall debt versus your overall assets.

If you have more debt than you do assets, you may be considered insolvent to the extent that your net worth is negative. Thus, potentially resulting in an exemption from these taxes or a reduced amount of tax liability.

During your free consultation with me, I will assess your potential exposure to taxes in a cursory manner. If you decide to employ my services, I will ask you to seek out a tax professional to gain a professional opinion on your tax exposure prior to extending my service.

I urge you to speak with a tax professional in reference to your situation before committing to settling your debts: it is very important to become aware of this potential cost first.

I hope this debt settlement advice helps you consider some things that you may have not considered otherwise. Please feel free to contact me or comment below with any questions or comments that you may have.

I was formerly one of the most successful debt collectors in the country. And don’t worry, I wasn’t one of those huffy-puffy types. I also held positions of Collection Manager, Corporate Trainer, and Director of Collection Operations. I’ve worked for large third-party collection agencies, collection attorneys and large debt buyers. (full bio)

I’ve dedicated my website towards truly explaining how debt settlement really works and to dispel the myths revolving around credit and debt.

I was formerly one of the most successful debt collectors in the country. And don't worry, I wasn't one of those huffy-puffy types. I also held positions of Collection Manager, Corporate Trainer, and Director of Collection Operations. I’ve worked for large third-party collection agencies, collection attorneys and large debt buyers. (full bio)

I've dedicated my website towards truly explaining how debt settlement really works and to dispel the myths revolving around credit and debt. ...

Disclosure: I may be financially compensated by any of the entities that I recommend on this website.

All recommendations are provided purely based on who I feel the most comfortable with for the particular scenario.

If you are considering getting help with your debt, please take the time to educate yourself by reading these featured articles:

We’re the only debt settlement company he has EVER allowed on his referral list.

Tom Martino has been fighting for consumers for more than 30 years utilizing Radio, TV, Newspapers, Magazines, and the Internet. Tom can be heard weekday mornings on the radio from 9 to noon on Denver’s popular AM talk station 630-KHOW. Each show is filled with calls from people needing consumer help, information, and advice.

Debt Relief Á la carte is not a credit repair company. We do not provide legal, tax, or investment advice. If you need legal advice, legal expertise, or court filings, you must seek the advice of a licensed attorney. Estimates are based on your collectabilty, our past experience, and settlement performance trends. Individual results may vary. The claims made are examples of past performance and are not intended to be a guarantee of any future settlement results. We do not provide debt settlement services in all states. We use reasonable care to ensure that the information appearing on this website is up to date and accurate. While we take precautions to prevent the occurrence of errors and omissions, the users of this website should not take the accuracy of the information for granted but should seek individual professional advice that is relevant to their particular situation and needs.